The EBRD is also a passive shareholder in both big universal banks - until recently, conduits of state mismanagement. Thus, the only segments of the private sector to benefit handsomely from the EBRD were lawyers and accountants involved in the umpteen lawsuits the EBRD is mired in. Put more intelligibly, it was NOT supposed to transform itself into a long-term investment portfolio with equity holdings in most blue-chips in the region. And its marbled abode - so out of touch with the realities of its clients and its balance sheet - should be sold to someone more up to the task. Not an entrepreneur in sight. Consider two examples: MACEDONIA The nascent private sector is nowhere to be found in the list of projects the EBRD so sagely chose to falter into here. The money was allocated to sycophantic cronies and sinecured relatives (often one and the same) and to gigantic, state-owned or state-favoured loss makers. The historic, pre-1998, portfolio appears impressive. If so, very little was risked.
The EBRD seeks to help its 26 countries of operations to implement structural and sectoral economic reforms, promoting competition, privatization and entrepreneurship, taking into account the particular needs of countries at different stages of transition. Development banks, like industrial policy, import substitution and poverty reduction, have gone in and out of multilateral fashion several times in the last few decades. Most of it lay idle and yielded to its hosts a hefty income in arbitrage and speculation. And where the IMF sometimes indulges in oblique malice and corrupt opaqueness, the EBRD wallows merely in avuncular inefficacy. As banks went bankrupt, they wiped whole portfolios of EBRD SME funds, theoretically guaranteed by even more bankrupt states. And it refuses to divest itself of stakes in the best run and most efficiently managed firms from Russia to the Czech Republic. It does not improve corporate governance. One of its main mistakes, in a depressingly impressive salmagundi, is that it channelled precious resources to this budding sector (SMEs), the dynamo of every economy, through the domestic, decrepit, venal and politically manhandled banking system. It is not equipped to monitor its vast and inert portfolio. The Bank applies sound banking and investment principles in all of its operations. The outlandish lavishness of its City headquarters, the apotheosis of the inevitable narcissism of its first French Chairman (sliding marble slabs, motion sensitive lighting and designer furniture) - is, at this stage, its only tangible achievement. But there is a consensus regarding some minimum aims of such bureaucracy-laden establishments - and the EBRD achieves none. It avoided project financing like the plague and met the burgeoning capital needs of small and medium size enterprises (SMEs) grudgingly. Moreover, even these investments and credits were geared towards traditional and smokestack industries: mining, food processing, pipelines, rubber and such. This it was mandated to do by providing finance where there was none ("bridging the gaps in the post communist financial system" to quote "The Economist"). This is the melancholy outcome of indiscriminate, politically-motivated lending and of a lackadaisical performance as both lenders and shareholders.
Through its investments it promotes private sector activity, the strengthening of financial institutions and legal systems, and the development of the infrastructure needed to support the private sector. It aims to impress the West with its grandiose projects, mega investments, fast returns and acquiescence. Almost 11 billion US dollars were generated by the EBRD's less than 4. It does not encourage entrepreneurship. Instead of Westernizing the Easterners - it has been Easternized by them. Despite vigorous protestations to the contrary, none of this money reached its proclaimed entrepreneurial targets. Established in 1991, "it exists to foster the transition towards open market oriented economies and to promote private and entrepreneurial initiative in the countries of central and eastern Europe and the Commonwealth of Independent States (CIS) committed to and applying the principles of multiparty democracy, pluralism and market economics. The bottom line reads 94 projects. It does not allocate economic resources efficiently. RUSSIA Its 2 billion US dollars portfolio all but wiped out in the August 1998 financial crisis, the EBRD has now returned with 700 million new Euros to be - conservatively but not more safely - lent in major energy and telecom behemoths. Instead, it colluded in the perpetuation of monopolies, shoddy and shady banking practices, the pertinacious robbery titled "privatization" and the pretence of funding languishing private sector enterprises. It does not enhance property rights. The inevitable result was a colossal waste of resources. It competes directly with other - more desirable - financing alternatives. Add "infrastructure-like" projects (water transportation and the like) - and less than 30% of the portfolio went to what can be called proper "private sector".In typical bureaucratese, the pensive EBRD analyst ventures with the appearance of compunction: "A number of projects have fallen short of acceptable standards (notice the passive, exculpating voice - SV) and have put the reputation of the bank at risk". It works in close co-operation with international financial institutions and other international and national organizations." Grandiloquence aside, the EBRD was supposed to foster the formation of the private sector in the revenant wreckage of Central and Eastern Europe, the Balkan, Russia and the New Independent States.
The SME and Trade Facilitation credit lines were conveniently divvied up among five domestic banks (one went belly up, the managers of two are under criminal investigation and one was sold to a Greek state bank). In the spirit of its first chairman, the suave and titivated Attali, the bank is in a constant road show, mortified by the possibility of its dissolution by reason of irrelevance. It should be administered a coup de grace. The Electricity and Telecoms monopolies are prime beneficiaries as is the airport. It throws good money after bad, cosies up to oligarchs near and far and engages in creative accounting. To varying degrees, these two countries are typical. In thus behaving, it is engaged in a perditionable perfidy of its fiduciary obligations. By implication it collaborates in graft, tax evasion and worse. Yet, when one neutralizes the infrastructural ones (including the gas and energy sector) - one is left with less than 50% of the amount. In the territories of its constituencies and shareholders it is known equally for its logy pomposity, the irrelevance of its projects, its lack of perspicacity and its Kafkaesque procedures.A bank, for instance. In fulfilling its role as a catalyst of change, the Bank encourages co-financing and foreign direct investment from the private and public sectors, helps to mobilize domestic capital, and provides technical co-operation in relevant areas. Its sedentary though peregrinating employees are more adept at wining and at dining the high and mighty and at haughtily maundering in the odd, tangential, seminar - than at managing a banking institution or looking after the interests of their nominal shareholders with the tutelary solicitude expected of a bank. Two loans were made to giant local firms - the natural preserve of commercial lenders and equity investors the world over
